Starting from Long-Run Equilibrium, a Large Decrease in Government Purchases

question 5

Multiple Choice

Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ______gap in the short run and ____inflation and ____output in the long run.

• A)expansionary; higher; potential
• B)recessionary; lower; potential
• C)expansionary; higher; higher
• D)recessionary; higher; potential

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Definitions:

Trial and Error

A problem-solving method involving repeated attempts to reach a solution, learning from failures until success is achieved.

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Trial and Error

A method of problem-solving that involves attempting different solutions and eliminating those that do not work.

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